Preamble

The House met at Eleven o'Clock

PRAYERS

[Mr. SPEAKER in the Chair]

PURCHASE TAX (ULSTER LINEN INDUSTRY)

11.5 a.m.

Captain L. P. S. Orr: I beg to move.
That this House, while welcoming the Chancellor of the Exchequer's recent statement about the Purchase Tax as removing uncertainty harmful to all trades affected by the tax, invites the Chancellor to take account of the contribution of the linen industry to the export drive and of the importance of this industry for the maintenance of prosperity and employment in Northern Ireland, and to include in the next revision of the tax upon textiles provisions which will remove the disability under which linen suffers.
From time to time this House has debates upon purely Welsh or purely Scottish affairs—indeed, we have considerable debates upon purely Scottish affairs—and it is sometimes a matter for regret that we do not have days devoted entirely to Northern Ireland affairs. There is, of course, the very good reason for it that in Ulster we have had a Government of our own since 1920 and this House has devolved certain of its functions upon that Parliament. Such matters as education, housing and police forces are dealt with in the Northern Ireland Parliament, and, in consequence, this House is not burdened with considerations of that sort.

Mr. James Hudson: There is also a body of Ulstermen in this House.

Captain Orr: That is so We are, naturally, a very pacific, kindly band of people. Nevertheless, I sincerely feel that it might not be a bad idea if there was an arrangement for Wales and Scotland similar to that for Northern Ireland. It would help to relieve the House of some of the long, and occasionally tedious, discussions which occur from time to time.

While those of us who represent Ulster in this House are concerned primarily with matters of broad national importance, it happens from time to time that the policies of the central Government have a peculiar and particular effect upon Ulster. It is very rarely that we have a full-scale opportunity of dealing with those problems, and that explains why, when I was fortunate in the Ballot, instead of choosing a subject which might have been of broader interest to the House, I chose one which had a particular bearing upon the situation in Northern Ireland.
By way of giving the House the background to the subject—it is against the background that the subject should be reviewed—I should like to say a little about the employment position and the economic position in Northern Ireland. There are about 1,500,000 of us in Northern Ireland, and for a long time our economic position has been very difficult and very dangerous in many ways. We have for long been dependent for our prosperity and for the employment of our people upon certain basic industries, primarily agriculture, textiles and shipbuilding.
I say that that situation is dangerous because if there should be a major recession in one of those three industries, it would immediately dislocate our whole employment position. There are not sufficient other industries to take up the slack, as it were, by employing the people who would then be thrown out of work. If, for instance, as might well happen, there should be within the next three or four years a serious falling off of orders for our famous shipyards, the biggest in the world, we might have a very serious unemployment position in Ulster. It is against that background that I invite my right hon. Friend the Financial Secretary to the Treasury to examine the problem.
The Ulster Government have made very serious and determined efforts to deal with the unbalance in our economy. They have done their utmost to attract new industries. They have gone to very great lengths to build factories for lease; they have adopted all sorts of devices, credit facilities and the like, to encourage new industries to come to Ulster so that our economic pattern might be diversified.
Unfortunately, they have not been successful. Perhaps it is not true to say that they have been unsuccessful, as they have been partially successful. But they have not had the success they deserve because the continual increases in transport charges have had an appalling effect on the possibility of diversifying our industry. Every rise in transport charges falls disproportionately on places far away from the markets, and that is one of our greatest difficulties.
I will not, however, anticipate the debate on a Prayer due to take place some time next week. I hope my right hon. Friend will regard that as merely a digression. Nevertheless, this is the background against which I invite him to look at the present position.
What is the present position in Ulster? We have at present 42,223 unemployed— 9 per cent, of our insured population. I invite my right hon. Friend to bear that figure in mind. The national average for Great Britain has been under 2 per cent, for a long time now, but ours is running at 9 per cent. That is a matter of very serious concern to us. These are not mere statistics, but represent the very livelihood of human beings. It is a position which we cannot continue to regard with anything approaching equanimity and I suggest that something must be done about it. The other night the Minister of Labour said that the Government believed in full employment. I suggest that full employment means full employment for the entire United Kingdom and I hope that that principle will be accepted.
With 42,000 unemployed, 9 per cent, of our insured population, it comes rather as a shock to us when we look at our textile industry, one of the three basic industries to which I referred, and find that 30 per cent, of the looms are idle. Obviously, that is something which ought to be very carefully considered. I wish to give my right hon. Friend the precise figures. We have 26,000 looms in Ulster, 18,000 of them are working and 8,000 are idle. Those were the figures as at the end of December, 1953.
It has been estimated—I think it is a fairly accurate estimate—that if these looms were working they would absorb about 7,000 workers. The effect upon employment would be considerably

greater because, if more were employed in weaving, there obviously would be more employed in the other parts of the trade—in bleaching, hemstitching and so on. If something could be done towards bringing those 8,000 looms into operation we ought to be able to reduce the unemployment, now standing at 42,000, by 14,000.
Consequently, I suggest that it is very important that we should have an opportunity of examining this industry and seeing in what way it can be helped. It is interesting, when we examine the unemployment figures, to find that, although there are all these looms idle —8,000 looms not working—the number of workers registered as unemployed weavers is under 1,000. We can only draw the obvious conclusion that something like 6,000 weavers have left the industry altogether. This is the experience of all the manufacturers.
The official figures produced by the Northern Ireland Government show that the total number of textile workers registered in May, 1951, was 77,580 and in May, 1953, it was 72,150. According to those figures, something like 5,500 skilled textile workers have left the industry. According to my other calculation, that would show that almost all are weavers—who perform a highly skilled and technical task.
I therefore suggest that there is certainly a prima facie case for looking into the industry and considering in what way the Government can help us, whether there is anything in Government policy which is hampering the industry and which, if possible, ought to be removed. No doubt in the long run, with the help of the Treasury, the Ulster Government have themselves been assisting the linen industry. They have been putting money into the industry.
The Ulster Government have been giving direct grants to the Irish Linen Guild to assist publicity and sales. The only condition attached has been that the industry should raise from its own resources a sum not less than the current rate of yield from the voluntary levy on production. The grant for 1953–54 was increased from £50,000 to £100,000 and a similar grant has been promised for next year. In addition, the linen industry and the Government have subsidised the production of home-grown flax.
It does seem a little odd, to put it no higher, that the Government—and, in the long run, the Treasury—are putting money into the production of home-grown flax and assisting the industry with sales promotion and also under the Acts for re-equipment of industry but at the same time are adopting policies which hamper the output of that industry. I invite my right hon. Friend to look at that question very carefully, because there is a very important Treasury consideration in it.
This brings me to the main point of the Motion—the effect of the Purchase Tax on the industry. My right hon. Friend will no doubt be familiar—possibly he would say only too familiar— with all the arguments put forward to show that there ought to be a reduction in the Purchase Tax on all non-woollen textiles. I am glad to see my hon. Friend the Member for Clitheroe (Mr. Fort) here in support of the Ulster linen industry and no doubt he will develop the general case in due time. I shall not go at great length over all the arguments which have been adduced by the non-woollen textile industries generally and which are emphasised to an almost inordinate degree in the case of the linen industry. Later, I shall give examples which show the effect of the tax on the linen industry. They apply equally well to other textiles, except that they happen to be better and more striking examples here because of the way in which the effect of the tax falls on linen.
I invite my right hon. Friend to look particularly at the D scheme. That scheme is the real bone of contention. Among the Ulster linen manufacturers, the D stands for all sort of things—destructive, disheartening, deplorable and downright disappointing. I can think of so many of them that I find myself muddled—disappointing, disheartening, difficult, disastrous—

Mr. Richard Fort: Damnable

Captain Orr: —and, indeed, damnable, as my hon. Friend says.
But, seriously, that represents the attitude of the linen industry to this D scheme. At the time the Douglas Committee was sitting, no representative of the Ulster linen industry was invited to give evidence before it. The industry has been gravely disturbed at the results which the scheme has produced.
Under the old Utility scheme, which was flexible in its nature, only the very expensive linens were subject to Purchase Tax, and certainly they were subject to a high rate of tax. Immediately the D scheme was introduced, a whole range of linen goods, which were formerly free of tax, became subject to tax, and the result has been very damaging.
I propose to give some examples because I want them to be on record, and I should like my right hon. Friend to study them. For instance, men's linen handkerchiefs—the sort I have here in my pocket—were tax-free under the old Utility scheme. I see my right hon. Friend is smiling. I shall be only too happy to send him some of these handkerchiefs, so that he can judge for himself. On second thoughts, perhaps I had better say that I will send him some when they are free of tax.
Today, these same handkerchiefs bear Purchase Tax at the rate of 4s. 6d. a dozen. It is really quite monstrous. As a result, sales in the United Kingdom dropped by 35 per cent, in 1952–53 compared with 1951. Linen sheets under the old Utility scheme were tax-free, but today they bear a tax of 13s. 6d. a pair. As a result, the sales of linen sheets in the United Kingdom dropped by 36 per cent, in 1952–53 compared with the quantity sold in 1951. The better qualities, which bear a tax of 30s. a pair, have been taxed out of existence.
Damask weaving is a very important and highly technical trade. Under the old Utility scheme, linen damask napkins were tax-free, but today they bear a tax of 7s. a dozen. As a consequence, there has been a drop of 42 per cent, in the quantity sold. The better qualities, which bear a tax of 31s. a dozen, are again taxed out of existence. Linen damask tablecloths—everyone is familiar with these beautiful cloths—which, under the old Utility scheme, were tax-free, today bear a tax of 11s. 3d. on each cloth. The result of that catastrophic tax was a 63 per cent, drop in the quantity sold on the home market in 1952–53 compared with 1951, and the better qualities of these tablecloths, which bear a. tax of 36s. each, are taxed out of existence.
I suggest that this is the reason the looms producing these things are idle. It may not be the whole story, but it is certainly a very cogent reason for removing the tax. I invite my right hon. Friend


to consider that. I could give hundreds of similar examples, and no doubt some of my hon. Friends who will be supporting me will give some others. The general result has been a substantial fall in the sales of these goods on the home market.
The serious thing from the country's point of view, apart from the damaging effect on the Ulster linen industry, both from the sales point of view and employment, is the effect upon our exports. This, again, is a point to which I would draw my right hon. Friend's attention. I will give some figures to show what a detrimental effect this trend has upon exports.
Prior to the introduction of the D scheme, exports of linen piece goods in 1951 amounted to 49½ million square yards and represented a value of £14,331,000. The exports of similar goods in 1953 amounted to 47 million square yards, and a value of £12,463,000, a drop of just under £2 million. The total exports of linen goods—thread and yarn—in 1951 amounted to £25.471,000, while in 1953 the figure dropped to £20,981,000. That is a very serious fall and, consequently, a very serious loss to our export trade.
I believe that the fall in exports' is due, at least partially, to the fall in the sales on the home market of these various products which are now subject to Purchase Tax. The first thing that a linen manufacturer considers when someone from overseas wants to buy a particular line of goods or wants him to make a particular type of cloth is whether, if the order is comparatively small, he can sell the same type of goods on the home market. If the cloth ordered is subject to tax at home, the chances are that the manufacturer will not take the risk, and, consequently, the cloth will not be produced for export.
As a result there is undoubtedly a tendency to debase the cloth—to make it cloth which can be sold free of tax. It is not necessarily the weight of the tax which kills the trade, but the almost pathological attitude of retailers towards anything which carries the tax. The retailers stand to lose if there is a tax reduction and will therefore not stock up.
It is perhaps a curious commentary upon our affairs—and if my outlook on this is incongruous perhaps my right hon.
Friend may be able to show the incongruity—that the cost to the Treasury would be approximately £500,000 in one year. That is very small considering, first, the money which was put into the industry, and, secondly, the enormous fall in exports. I know that the Chancellor is particularly concerned about the export position and no doubt he will bear that point in mind.
Another point which should appeal to the Treasury is that linen, unlike other textiles, does not rely upon dollars for its raw materials. Our raw material is flax, which comes from non-dollar sources. In fact, a quarter of our raw material is produced at home and provides employment for our own people. I ask my right hon. Friend to remember that in his considerations. Indeed, the linen industry has given considerable aid to the farmers in producing homegrown flax, because it pays the world price plus a special premium. That, over the last four years, has cost the Northern Ireland linen manufacturers about £500,000—and that is a fair amount of money.

Mr. Dryden Brook: Will the hon. Gentleman tell the House how much of the raw material used in the woollen industry is a dollar import?

Captain Orr: I was referring to non-woollen textiles. I was thinking chiefly of cotton, which draws most of its raw material from a dollar source.
The present position of the linen industry arises from what happened when the D scheme was introduced. I am anxious to state this with moderation and not to upset my right hon. Friend in any way, but when I look back I must say, however, that if I allowed myself to expatiate at any length upon the course of negotiations over the last two years I would find myself drifting—out of the memory of sheer frustration—into anger, and perhaps into something which I did not intend to say. I will, therefore, only say that when I look back I do so with a sense of frustration.
When the D scheme was introduced, the linen industry, to its horror, found that the D level for linen was precisely the same as that for cotton and rayon. In spite of the negotiations which have gone on, and in spite of it being pointed


out that this places a very unfair disability upon the linen industry and puts it into a different position from that under the Utility scheme, this state of affairs has been allowed to continue.
The curious thing is that over the last two years the Treasury—I use the word "Treasury" and not "my right hon. Friend"—has never said either, "We will meet your case" or, "There is no validity in your case and we propose, so long as the D scheme lasts, to keep your levels the same." It is the purpose of this Motion to try to elicit a clear answer on that point as soon as possible.

Mr. Arthur Moyle (Oldbury and Hales-owen): I can assure the hon. and gallant Member that we on this side are very much enjoying his speech, but why does he place responsibility for all the trouble on the Treasury when, in fact, it is the Government who were responsible for the introduction of the D scheme?

Captain Orr: My purpose in referring to the Treasury and not to my right hon. Friend is a tactical one which is employed in this House. I do, in fact, regard them as being in the same boat and equally responsible.
When the D scheme was introduced— under the Finance Bill as first drafted and before it was considered in Committee in this House—we found that the level was 4s. per square yard, except for a very few sections where linen had been given a 6s. level. Subsequently, in most cases the level was raised to 6s., but, of course, a good deal of cotton and rayon was also raised to that figure. This has operated extraordinarily unfairly against the linen industry. My right hon. Friend has had a considerable amount of correspondence from the linen industry and myself showing precisely how the unfairness operates, and all we ask in this Motion is that this particular and peculiar disability should be removed.
Naturally, by far the best solution would be the removal of the Purchase Tax altogether. The more one looks at Purchase Tax, and the more one reads the reports of Sir Maurice Hutton and others, the more one sees it is a bad tax. I hope not only that my right hon. Friend and the Treasury have its total abolition as their ultimate aim, but that when next reviewing the tax—my right hon. Friend

will bear in mind that, although the Chancellor claimed that his statement removed uncertainty, as I think it does, it removed uncertainty by prolonging uncertainty—he will meet our case.
I might just refer my right hon. Friend to something which the Chancellor said when winding up the debate on the changes in Purchase Tax Orders relating on jewellery and silverware. In Ulster, we deeply regretted that linen was not included in those Orders before the Chancellor made his standstill statement. There is no reason why it should not have been included, because the arguments advanced by the Chancellor to justify the alterations in Purchase Tax on jewellery and silverware apply in precisely the same way to the linen industry.
In his statement the Chancellor said:
The reason for that is exactly the same as 1 have explained to the House before, namely, that the jewellery and silverware trades, the economic circumstances of which I most closely examined before the decision was made, are such that they could not bear the tax at 75 per cent, which was on their products before. They were actually going downhill."—[OFFICIAL REPORT, 9th February, 1954; Vol. 523, c. 1074.]
That applies to the Ulster linen industry. I think that perhaps the figures that I have produced this morning show that that is so. Exports and home sales are falling. Unemployment is rising. Weavers are leaving the industry. The industry is going downhill.
The Chancellor went on to say that men were being dismissed in the Ulster linen industry and, what was most important, that the old crafts were disappearing. Damask weaving is an old craft which has been going on for many years. It takes a long time to train a good damask weaver, and the good damask weavers are leaving the industry. I invite my right hon. Friend to read what the Chancellor said about the silver and the jewellery position, and he will see that precisely the same arguments apply in the case of linen.
The Ulster linen industry has been very much in the hearts of our people for a long time. This industry is not confined solely to the great City of Belfast. It is scattered all over the countryside, in little villages and country towns here and there along the valleys of the Bann and the Lagan—small hemstitching factories.
bleach works and the like. All our employment in those villages is scattered around the bleach works or the spinning mills. If there is a recession which causes a spinning mill to go on half time, the misery produced in that village is out of all proportion to the state of affairs which would arise if it were a big industry in a town. The whole life of a village is affected.
We are very proud of our linen industry in Ulster. It is almost woven into the folklore of the country. Perhaps I may be allowed to tell the House about one of our better-known modern folk songs over there. It tells the story of a man who became somewhat tired of his wife and cut her throat with a razor blade. Then in remorse he went out and hanged himself with a linen sheet. The last verse of the poem goes like this:
The strangest turn of the whole concern Is only just beginning,
He went to Hell, but his wife got well And is still alive and sinnin';
For the razor blade was German made But the sheet twas Ulster linen.
I ask my right hon. Friend seriously to consider this Motion and to ask the Government to accept it and see whether they can meet the case that I have put forward. I invite the House to accept this Motion, if possible without a Division, so that we may give some encouragement to an industry which has been an old friend of this country in peace and war.

11.44 a.m.

Lieut.-Colone H. M. Hyde: I beg to second the Motion.
I am very glad to have this opportunity to support the arguments so convincingly and entertainingly deployed by my hon. and gallant Friend the Member for Down, South (Captain Orr). My hon. and gallant Friend, as appeared from his speech, has devoted a great deal of his time and energies over the past few years to the peculiar problems of the industry, and I am sure that the industry as a whole is very grateful to him for the effort which he has made on its behalf in this matter of the operation of the Purchase Tax, which is of immediate concern to the industry and to hon. Members who represent Northern Ireland constituencies.
I am very pleased to be able to add a few remarks in support of the case

which he has so forcefully and clearly demonstrated for a revision of the tax as it affects the linen industry in Northern Ireland. Northern Ireland is the greatest linen manufacturing country in the world. The hub of the area is Belfast, of which I am a native, and half of which I am consequently very proud to represent in this House.
Belfast is also the chief manufacturing centre, and as well as that, it is the commercial focus of the industry and its principal port. Three-quarters of the linen mills are situated within a small radius of 30 miles of the city. Some of the industry's largest mills and factories are situated in my constituency, and large numbers of my constituents are employed in one way or another in the production of this staple commodity.
I have also a deeper and more personal interest, for many members of my family have been engaged in the linen business for many generations. My father spent the greater part of his life in it, and my great grandfather, whom I remember as a child, went out to New Orleans in 1847 and spent several years in America in a not unsuccessful endeavour to stimulate the export of Irish linen and to popularise its use in the United States. I have myself worked in the industry, and before that, as a boy, I spent part of each summer during the First World War helping to pull the flax, which is still pulled by hand, in the fields in County Down—flax which I liked to think was waiting to be manufactured into aeroplane cloth.
There is an old Spanish proverb to this effect: "Choose neither a woman nor linen by candlelight." I always think that one of the most beautiful sights is a damask tablecloth set for dinner by candlelight. But the qualities of the linen, like the women who lend additional adornment to the table, are perhaps more readily tested by the harsher light of day. I hope that my hon. Friend the Member for Down, North (Mrs. Ford) will understand me when I say that the qualities which we look for in women are those which we also look for in linen—qualities which are outstanding and which distinguish the linen from other textiles.
I would describe these qualities as strength and adaptability, smoothness


with absorbency, coolness with softness, and durability with beauty of texture. It is these qualities which make Irish linen, like Irish women, world famous. When I use the term "Irish linen" as it is commonly used in the trade, I mean the product of Northern Ireland, where linen has been made since very early times and where its production developed on a considerable scale after the end of the 17th century. Behind the manufacture of Irish linen lies skill accumulated and handed down through generations of workers, and the fine linens of Ulster have never been surpassed.
Moreover, as my hon. and gallant Friend emphasised, there is still something of the characteristic of a craft about the Ulster linen industry as a whole. This is seen in the experience and judgment called for in dealing with various grades of the raw material, the flax, in the occasional survival of processes still carried out by hand, in the importance attached to personal supervision of all the processes in linen manufacture and, above all, in the pride taken in the quality of the finished article. Many linen firms retain the character of family businesses, and are often identified with the life of small townships and villages in the countryside.
The linen industry in Ireland is one of great antiquity. We know that fine linens have been made in that country since early times. The first linen fabrics are believed to have been introduced by Phoenician traders, long before the time of Christ. The ancient Brehon laws, which were dictated and recorded at the instance of St. Patrick in the fifth century A.D., enjoined the farmers of Ireland to acquaint themselves with the cultivation of flax, for which the soil of the country, particularly in the north, has always been especially suitable.
That great traveller Fynes Moryson, who was a Member of this House in the reign of the first Queen Elizabeth, and later wrote a history of Ireland covering the years when he was Chief Secretary to the Queen's Viceroy, had this to say about the industry, in about 1600.
Ireland yields much flax, which the inhabitants work into yarn and export the same in great quantity; and of old they had such plenty of linen cloth, as the natives used to wear 30 or 40 ells in a shirt, all gathered round and wrinkled and washed in

saffron because they never put them off till they were worn out.
That does not mean to say that they never took them off, but it is evidence of the durability of linen garments, even in those days, when they stood up to a great deal of wear and tear, as they had to because of the constant fighting on the part of those who wore them.
Dictators frequently commit acts of great stupidity, and those acts sometimes benefit others outside their countries. It was the act of one of these dictators—the French King Louis XIV—that conferred perhaps the greatest benefit upon the Irish linen industry. In revoking the Edict of Nantes in 1685, the act of toleration which guaranteed freedom of worship to the Protestants of France, Louis XIV drove out of France 6,000 Huguenots, who took refuge in Ulster, and they brought with them the skill and the craft which has been handed down from generation to generation to the present day.
I am sorry that my hon. Friend the Member for Antrim, South (Sir D. Savory) cannot be here today. He has strong family associations with the Huguenots and I know that he would have liked to have taken part in this debate on an industry which the skill of his ancestors did so much to establish and perpetuate, especially as the original Huguenot settlement was at Lisburn, which is in his constituency. Unfortunately, he is still suffering from the effects of the accident which befell him last year, and is not yet fit to travel. I am sure that I am expressing the views of hon. Members on both sides of the House when I say that I hope it will not be long before he is able to make the journey here from Northern Ireland and take part again in our discussions with his characteristic and endearing enthusiasm and his wide range of knowledge.
The character of linen products has naturally changed with the years, and the industry has adapted itself to the changing needs of the consumer abroad as well as at home. With the introduction of steamships, the manufacture of coarse cloths, such as sail cloths, was dropped, and the industry tended to concentrate on the products for which it is now best known—a wide variety of articles of lighter cloth for domestic and clothing uses, such as sheets, pillow cases, damask cloths, towels of all kinds, handkerchiefs,


dress linens and shirtings. Large quantities of sewing threads and yarns continue to be exported.
The export of Ulster linen became world-wide in the last century and probably reached its height, as regards yardage exported, in the early years of the present century. After the First World War there was a severe recession within the trade, partly due to changes in fashion and housekeeping methods, partly to increased competition from other fabrics and partly to the loss of sources of raw material, notably in the Baltic States and Russia. But linen is still one of Ulster's most important products, and one of the most important exports of the United Kingdom
After the last war the selling price of linen advanced considerably, and during 1951 the value of linen goods and yarns exported from the United Kingdom was an all-time record, amounting to over £14 million, of which nearly half went to the United States of America. During the past two years this figure has dropped to between £12 million and £13 million. Nevertheless, as my hon. and gallant Friend the Member for Down, South emphasised, linen is a very substantial dollar earner. It has the advantage over cotton that we do not have to import from dollar sources any of the raw material which goes into its manufacture.
Last year the United States took 47.9 per cent, of Ulster linen shipments overseas, amounting to 23 million square yards. Commonwealth countries took 24.3 per cent.; Latin-America, 9.3 per cent.; Europe 8.9 per cent.; and other countries, 8.8 per cent. Exports have fallen off to some extent during the past two years, and there has also been a marked decline in the home trade, which has fallen from 35.7 per cent, of the total output value in 1951 to 31.3 per cent, in the last quarter of 1953.
The employment aspect of the industry is reflected in these trends. We have already heard that there are now over 42,000 unemployed in Northern Ireland, representing 9 per cent, of the insured population. About 8,000 looms are idle, which is nearly three times the number idle at the beginning of 1951. That is a large figure, representing over 30 per cent, of the looms available for the manufacture of linen in Northern Ireland. In
the past two years there has also been a distinct reduction in the number of registered textile workers—by over 5,000 —which surely points to the fact that the skilled workers are drifting away from the industry.
With informed opinion in the trade, I believe that these unfortunate developments are directly attributable to the unfair operation of Purchase Tax, in the form known as the D scheme. I should like to recall very briefly the origin of the scheme and how it affects the linen industry in particular. As the House will recall, the scheme came into effect following the Report of the Douglas Committee in the spring of 1952, and it was designed to replace the Utility scheme in respect of all classes of goods except furniture. Under the Utility scheme, linen textiles had certain minimum specifications. It was laid down how the various cloths were to be woven and how the finished products were to be put together.
Goods selling below certain maximum prices were exempt from Purchase Tax, so that within the framework provided by these fixed standards there was a certain amount of freedom and flexibility, which made it possible to develop the manufacture of tax-free goods. Under the Utility scheme practically all the sales of linen in the United Kingdom in the months immediately preceding the introduction of the D scheme were tax-free.
Under the Utility scheme standards and maximum selling prices were also laid down for cotton and rayon textiles, but the maximum selling prices in those cases were separate and distinct from those established for linen goods. Broadly speaking, linen enjoyed, under the Utility scheme, a 50 per cent, preference over cotton and rayon. Under the D scheme it was provided that if the wholesale price of the articles was at or below a certain figure known as the D price or level no tax would be payable.
When the details of the D scheme were published, the linen trade, which, as my hon. and gallant Friend has pointed out, was not represented on the Douglas Committee, discovered to its dismay that the same D levels had been applied to linen, cotton and rayon household goods, namely, 4s. per square yard, with about three exceptions, where linen had a 6s. level. The position, therefore, was that


although the D scheme was intended fairly to replace the Utility scheme, the important principle of fixing its own levels of value granted to it under the Utility scheme was completely abandoned.
Obviously this must seriously affect the ability of the linen industry to compete in the home market against other fabrics the costs of production of which are much lower, because linen is a more expensive fabric, for instance, than cotton to manufacture. The 50 per cent, preference that linen enjoyed under the old scheme was accepted by the linen industry as fair and reasonable.
When the details were published, the Central Council of the Irish linen industry immediately protested against this aspect of the D scheme. The feelings of the industry were further exacerbated when it was learned about that time that the Chancellor of the Exchequer proposed to increase the 6s. D level of cotton and rayon that was Class B material in the Fourth Schedule to the Finance Bill of 1952 and which weighed 6 ozs. or more per square yard. This decision meant that the relative position of linen to cotton and rayon in the categories at which the new scheme applied was actually made worse.
Various meetings and discussions, to which my hon. and gallant Friend alluded, took place on the subject between the leaders of the industry in Northern Ireland, hon. Members on this side of the House representing Northern Ireland constituencies and Treasury officials. Here I should like to pay a tribute to the late Sir Walter Smiles, a much esteemed Member of this House, and the father of my hon. Friend the Member for Down, North (Mrs. Ford), for the energy and zeal with which he pursued this whole question. He spent a great deal of his time in the last months of his life in putting our case forward, and we in Northern Ireland owe him a great debt.
The case he pressed was—and still is— that the only fair treatment for linen under the D scheme was to make the D level for linen 50 per cent, above the corresponding level for cotton and rayon. As well as the Chairman of the Customs and Excise Board, there were at those interviews the Chancellor of the Exchequer and the Financial Secretary to

the Treasury. As a result of those interviews, the representatives of the linen trade gained the impression that if they were prepared to accept a minor Amendment to the Finance Bill, 1952, to enable the Bill to be passed without any opposition on the part of my hon. Friends on this side of the House, the Irish linen industry's case for the restoration of the 50 per cent, preference could be dealt with by Order in Council. That may have been a mistaken impression, but it certainly was the impression which we all gained at the time, and on that understanding my hon. Friends did not press the other Amendments that they had tabled.
The concession in question which was eventually introduced on Report stage of the Bill merely brought the linen goods within the 6s. range, but by this time the D level for cotton and rayon weighing more than 6 ozs. per square yard had been increased to 6s. per square yard, so that that concession only gave linen parity with cotton. This is what the Chancellor said at the time:
Then we come to the second concession, which relates to Northern Ireland. Unemployment in Northern Ireland is as severe as or more severe than almost anywhere in the United Kingdom, and quite apart from that there was a certain anomaly between the concession already given in Ds to Northern Ireland for the products of linen, leaving aside linen piece goods. We therefore decided, after mature consideration, to give this special D for linen cloth in the piece.
It is true that a great deal of the products of Northern Ireland are sold as products of linen and not in linen piece goods, and to that extent this concession will not affect the prosperity of Northern Ireland, in my view, as much as the original concession o-n linen products. But … it has the advantage that linen sheeting in the piece, which is used mainly by hospitals and other large institutions, now receives the same rate of D as finished linen sheets. It is, therefore, a sensible concession and I hope that it will meet the needs and wishes of the Northern Ireland Members who have shown great activity in this matter and great interest in the difficulties of (Northern Ireland at the present time."—[OFFICIAL REPORT, 18th June, 1952; Vol. 502, c. 1484–5.]
We were all grateful for that concession, but, of course, it did not satisfy either my hon. Friends or the trade at all. Nevertheless, we accepted it in the hopeful expectation that further remedial action would be taken by Order in Council on the lines I have tried to indicate.
That all took place 21 months ago, and though the trade association of the linen industry has continued to press its case, no further remedial steps of any kind have been taken. I consequently feel bound to point out to both the Chancellor of the Exchequer and the Financial Secretary that the linen industry in Northern Ireland—and I know I am using slightly stronger language than my hon. and gallant Friend used—feels that it has been badly let down. Its leaders take the view that they were given what amounted to practically an undertaking, although, of course, it was understood that the Government could not pledge themselves in advance to take any particular action.
The cost to the Treasury so far as linen is concerned of removing the tax would not be great, about £500,000, but it would remove the sense of injustice, of unfair treatment, that the linen industry representatives feel has been their lot since the beginning of the D scheme. They feel that they have been fobbed off with fair words. I have recently detected evidence of considerable discontent throughout the industry in Northern Ireland because of the Government's conduct in this matter.
The failure to effect the full restoration of the 50 per cent, preference over cotton and rayon is only one aspect of the Irish linen industry's grievance. There is the damage to export trade from which the industry has suffered and is suffering in the most alarming and distressing degree. Of course, the argument about the damage to export trade, I appreciate, applies in the case of other non-woollen textiles. Those arguments have frequently been advanced in this House. They will undoubtedly be advanced again by my hon. Friend the Member for Clitheroe (Mr. Fort), whom I am very glad to see in his place this morning, and I am sure that the Financial Secretary is sick and tired of those arguments. At any rate, he must be very familiar with them by now.
I would only say that the linen industry has never been able to indulge in what is known as speculative production for the export market. The best course in the linen industry has always been to have a healthy home market with ranges of good quality merchandise available for

trying out in that market, to test consumer reaction as a necessary preliminary to exporting. A major point in the Douglas Committee's Report was that the D scheme would eliminate the so-called blind spot—that is, the range of goods immediately above Utility grades which would have to bear full Purchase Tax and so carry a price differential which made it uneconomical to produce them. But far from being eliminated, the blind spot has been increased, certainly for linen, with disastrous results.
The effect of the D scheme has been to distort the whole pattern of the linen industry by inducing manufacturers and traders alike to keep below the D level. This has led to the dropping of lines which are above the D level and the debasement of other lines so as to make them tax-free, with the result that the range of qualities offered by the industry abroad tends to become less adequate and thereby less attractive to buyers.
My hon. Friend has given a number of examples of this, and I should like to add one or two others. The first concerns linen pillow cases. Under the old Utility scheme these commodities were tax free. The Purchase Tax on them today is 3s. 6d. a pair. As a result, sales in the United Kingdom have dropped in quantity by 42 per cent., comparing 1952–53 with 1951. The better quality of linen pillow cases, which bear tax up to 10s. a pair, are taxed out of existence, and this seriously harms the export trade in pillow cases.
The next example is of embroidered linen tea cloths. My hon. and gallant Friend has offered to give the Financial Secretary some handkerchiefs. I should like to give him an embroidered linen tea cloth but I do not think I shall be able to do it for very much longer because the production of these beautiful objects is gradually dying out. Before the D scheme was introduced, the tax was very low except in the case of the most expensive lines. Today, Purchase Tax is 18s. 6d. per cloth. Surely a healthy home trade would help the export trade in tea cloths. The production of these tea cloths, which are most beautifully embroidered, depends upon the craft of those who do the embroidering, and this craft is gradually dying out.
My final example is of linen damask towels which under the old Utility scheme were tax free. Under the D scheme, today, the Purchase Tax is 8s. 2d. per dozen. Comparing 1952–53 with 1951, there was a 60 per cent, drop in the quantity sold. The better quality of these linen damask towels are taxable up to 34s. a dozen, and are taxed out of existence.
My hon. and gallant Friend also mentioned linen napkins. The good quality 22-ins. by 22-ins. linen damask napkin was previously tax-free up to 53s. 2d. a dozen. The D level is now set at 36s. and the only way to make such napkins tax-free is to manufacture them in much smaller sizes, which sell at the same D figure of 36s., but if this is done there is no demand for these sizes in the American market.
It is a tragedy that these better lines of linen are being taxed out of existence. In this connection, I want to quote two short extracts from letters written recently by leaders of the linen industry. The first reads:
We do appreciate the efforts the Chancellor has made in certain directions, but this D scheme is a very considerable irritant in our flesh, and we cannot experiment in making new lines of goods for export if we are tied down continually to making inferior classes of goods which will come in under the D scheme level.
The other letter, which was written only a few weeks ago, reads:
One thing is certain, and that is that on the finer qualities that are so heavily taxed we are gradually coming to the conclusion that it would be better to drop them altogether, and this will mean that we shall not have them for export purposes either.
To sum up, the situation in the linen industry today is tragic. There is grave unemployment. One-third of the looms are idle and the industry is not manufacturing the fine linen for export which it should manufacture. This is all because of the drastic and we think inequitable incidence of Purchase Tax. The industry is uneasy about the future. It is true that the Chancellor of the Exchequer's recent announcement that there will be no changes in Purchase Tax Schedules in the forthcoming Budget has removed a measure of uncertainty, but the element of uncertainty in the linen industry remains and must remain as long as the tax continues.
We appeal to the Chancellor of the Exchequer to take a remedial action before it is too late, and we particularly invite him, in the words of the Motion,
to include in the next decision of the tax upon textiles provisions which will remove the disability under which linen suffers.
We pray that this revision will come soon, otherwise not only will the Chancellor forfeit the good will of the leaders and workers in the Ulster linen industry but he may also deal what may well turn out to be a mortal blow at the foundations of a world-famous industry which has contributed so much in the past to the prosperity of the United Kingdom and the economic welfare of its citizens.

12.17 p.m.

Mr. James Hudson: I do not think that anyone will complain that Members representing Irish constituencies have thought it right to bring a Motion of this sort forward for our consideration. During the course of the speech by the hon. and gallant Member for Down, South (Captain Orr), I remarked that possibly the Irish representatives are a little too docile in the presentation of their cases, especially when they have a Government like the present which ought to be more squeezable by Northern Ireland Members than, say, a Government representative of hon. Members on these benches. I think that Irish Members ought to have taken a great many other opportunities to procure for themselves some consideration of their cases—many more opportunities than they have taken. I was glad to hear hon. Members speak of the way in which Scottish and Welsh Members seize their opportunities and drive home their arguments.
I think there is a case for the linen industry in Northern Ireland. I do not think it is quite as hon Members have represented it to us, although the hon. and gallant Member for Belfast, North (Lieut.-Colonel Hyde) went into great detail in the presentation of the effects of the operation of the D scheme and the competition which arises from cotton and rayon which adds to the difficulties of the linen industry.
We do not know what the hon. Member for Clitheroe (Mr. Fort) will say, and I am rather anxious to hear how the cotton industry reacts. Northern Ireland


hon. Members spoke as if the hon. Member for Clitheroe is completely on their side but I know something about the cotton industry—for I was born in the area where cotton is made, and I have been greatly interested in its production.
No doubt one of the grave defects in industry today is that the beautiful work which was done in the past in the linen industry of Northern Ireland is coming to an end. I do not think that this is due altogether to this tax, although I am with those hon. Members who have made their case for it to be removed. But, of course, the better they make their case the more other industries will make a similar case. I am quite sure that the right hon. Gentleman will tell us something about that when he comes to reply.
I would support their case because I want to see the removal of Purchase Tax upon articles, apart from purely luxury articles. I do not think that the beautiful tablecloths used by ordinary people ought to be regarded as any kind of excessive luxury. I know the working class of Lancashire and the housewife who preserves at least one extra good tablecloth for Sunday afternoon tea. She is most careful of her Irish linen. She regards it as one of her treasures, to be brought out and shown to her friends on Sunday afternoons when they visit the home.
I claim the right of the ordinary person to have a beautiful tablecloth just as much as that of the American market to have the finer things that are made in Northern Ireland. But I realise that it is not only the question of Purchase Tax that is altering this state of affairs. The coming of rayon and the development of beautiful cloths in which rayon and cotton and other textiles are combined is putting on to the market a commodity with which the Northern Ireland industry will have to compete. I do not think that the industry is being helped to face this competition by the action of the Government in hanging on to Purchase Tax.
I hope that the right hon. Gentleman has taken particular note of the figures which have been given, and that there has been no success under the D scheme in improving the export trade. I remember in the days of Sir Stafford Cripps the argument being that Purchase Tax

would be placed upon articles to discourage people from purchasing home commodities which they could do without in order that the export trade, in the interests of dollars particularly, might be encouraged. That has not worked.
I would emphasise the figures for 1951 which the hon. and gallant Member for Down, South gave—the reduction from 49 million square yards to 47 million square yards in the export of linen piece goods. This indicates that we are not improving our export trade and that we are not getting more dollars by the process of making it more difficult for people to secure linen at home.
I agree that in this matter, as in other matters, it is right that the pressure should be kept up for consideration of the defectiveness of this type of tax, and the case of the linen trade in Ireland should be kept specially in mind. I think that the hon. and gallant Gentleman, and particularly the representatives of Northern Ireland, ought to have said something more about the departure of the weavers. The loss of the highly-trained skill of those people who used to make the lovely damask tablecloths is a tragedy for everybody, and for Northern Ireland in particular. But, of course, weavers do not go only because of the Purchase Tax.
I should have liked to have heard more about this from the representatives of Northern Ireland. I have not the facts, and although I have heard stories about this, I am not going to quote them, as I am not sure of the facts. I should have liked to have heard how the wages of the weavers in Northern Ireland engaged in the linen industry compare with the wages of the weavers in other trades. How do the wages of the linen workers in Northern Ireland compare with the wages of the workers there in the cotton and rayon trades? I think that we shall find that there is a case for more constant watchfulness on the part of the Irish linen industry to bring the conditions of their workers up to a better level than at present obtains.
I know that in Northern Ireland wages tend to be very much better on the northern side of the border than on the southern, but that is not the point to be considered in an industry of this kind. We have to consider the competitive power of the industries employing


weavers of goods which are being turned out as substitutes for linen as being one of the difficulties with which the linen trade is confronted. I think that we should have been told more about that. Perhaps we may be told more about it before the end of the debate, so that we can arrive at a better judgment of the matter.

Captain Orr: The figures I gave were the numbers of textile workers registered. In other words, there can be no suggestion that the weavers who have left the linen industry are employed in any other textiles. They have disappeared from textile working altogether. There cannot be any suggestion that they have gone to work on other fabrics. So far as wages are concerned, linen is included, as are other textiles, in the general wages scheme laid down by the Government.

Mr. Hudson: Is it possible to say from these figures that the weavers who have gone out of the Irish linen industry, that is, the 6,000 referred to, have disappeared into, say, the transport industry or into the shipyards? Some, I think, have done, but I am quite certain that the weaver will look for an opportunity to weave in some other textile industry.
I know that woollen weaving is very different from linen weaving, and that it would be difficult for a linen weaver to go into woollen weaving, but certainly cotton and rayon weaving are not so vastly different from the type of weaving that these weavers have been accustomed to. I am thinking of the finely-finished cotton and rayon weaving—the weaving of cloths which enter into competition with the fine damask cloths of Northern Ireland. I have heard in Lancashire of one or two cases where weavers have given up the business of trying to find a place in Northern Ireland, and have departed from Northern Ireland for good and entered an entirely different trade. If the hon. and gallant Gentleman tells me that is not so, I am unable to disprove it, because I know of only two or three cases which have led me to address the inquiry which I have made.

Captain Orr: I think that there is something in the hon. Member's point, and that some may have had to leave Northern Ireland altogether, but I do not think that the whole 6,000 have left

Northern Ireland. If they are employed in Northern Ireland or registered as unemployed in Northern Ireland, they are. not registered as employed, nor are they employed, in any other textile industry. There is quite a lot of rayon and other textiles produced in Ulster.

Mr. Hudson: I address this inquiry to those who are interested and better qualified to speak about the matter than I am.
I hope that the Government, out of the experience collected from various industries, will take a much more serious view of the effects of the Purchase Tax than they have taken up to now. I know that the Chancellor has been hearing of the difficulties of industry and of consumer societies. The co-operative movement, for example, for which I generally speak, is very distressed about the unfairness of the Purchase Tax to consumers. There are still a large number of articles which ought not to be regarded as luxuries. They enter into the trade and buying of ordinary people, and should not be subject to this kind of taxation.
I join with the representatives of Northern Ireland in appealing for a far more serious consideration of this issue. I know that the Financial Secretary to the Treasury will tell us that he cannot reveal any of the secrets of his right hon. Friend's forthcoming Budget, but I hope to see in that Budget some radical advance towards the removal of Purchase Tax altogether, at any rate on those big ranges of articles that can fairly be regarded as articles which ordinary people should have the right to purchase in this country.

12.32 p.m.

Mrs. Patricia Ford: I wish to support the Motion which has been so ably moved by my hon. and gallant Friend the Member for Down, South (Captain Orr) and I should like to say how particularly I appreciated the remarks made by my hon. and gallant Friend the Member for Belfast, North (Lieut.-Colonel Hyde) in comparing Ulster women with the best qualities of Irish linen. All Members representing Northern Ireland are glad of this opportunity of drawing the attention of the Government to certain aspects of our economic difficulties in Ulster, which are the responsibility of the Exchequer here.
This morning we are discussing the grave disabilities under which the linen industry in our province is suffering. I refer, of course, to all branches of the trade—the growing and spinning of flax, the manufacture of linen thread, the weaving and finishing of linen and piece-goods, the making up of handkerchiefs and every kind of household articles. All these are affected by the heavy Purchase Tax on linen. I should like to supplement some of the points already made by my hon. and gallant; Friends and also by the hon. Member for Ealing, North (Mr. J. Hudson), but in doing so I should like to approach the problem from a woman's point of view.
I am afraid that the traditional "bottom drawer" of the modern bride no longer consists of a trousseau of household linen. Gone are the days when a mother gave her daughter enough high quality linen for her new home to last a lifetime. The main reason for that is the high Purchase Tax on linen goods. There is no doubt that manufacturers today cannot and do not make the same high quality linen as; was made in the last century. The industry has had to adapt itself to the manufacture of new materials and to the use of other natural and artificial fibres. During the war, production could be maintained only by using non-flax imports on orthodox flax-spinning machinery. These goods were spun into rayon and union materials. I am afraid that this trend may continue and that more stress will be laid on the production of rayon and other materials than on pure linen fabrics.
It would be tragic if this ancient craft died out. I have at home linen sheets in everyday use which are over 100 years old. But the public today are not linen-conscious. During the war, linen could hardly be found in the shops, so the housewife was forced to buy substitutes. She lost the habit of buying good linen and now it is difficult to get her to buy linen at all because of the high price. The Purchase Tax, on top of these postwar prices, is strangling what is left of our world-famous linen trade.
The introduction of the D scheme was a serious matter for the linen handkerchief trade in Northern Ireland. Before this, linen handkerchiefs had been selling under the Utility scheme free of tax.
Under the D scheme this changed overnight, as the low D level for linen meant that no linen handkerchiefs could escape tax. Even the very cheapest carry some tax and, however low that tax may be, retailers are not anxious to carry these lines if they can avoid it. I hope perhaps that after this debate we shall all be given a present of some linen handkerchiefs.
The effect of this is that very little linen is now being used for handkerchiefs in the home trade, which means that manufacturing costs go up and export prices go up, too—hon. Members know the valuable contribution made by high quality textile exports to our dollar earnings. If the D level were raised to a fair figure, there is no doubt that a bigger home trade would lead to a reduction in export prices.
The cultivation of flax and the manufacture of linen in Great Britain dates from Roman times or even earlier, as was pointed out by my hon. and gallant Friend the Member for Belfast, North, but it was not until the 14th century that a Linen Guild became established in London. This was composed mainly of weavers brought over from Europe by Edward III. The Linen Guild remains to this day and is doing much to boost our linen in the United States and other countries. In Northern Ireland the Huguenots did a great deal to expand the industry and we have in Northern Ireland today many families who still bear the romantic names of these French emigrants.
The Irish linen trade is still very largely in the hands of small firms and family businesses. The majority of these are single establishments, and until as late as 1935 almost half of them employed less than 100 people. Some, of course, are now being swallowed up by the bigger concerns. As the hon. Member for Ealing, North has pointed out, the manufacture of linen is a highly skilled craft, especially damask weaving. In fact, when radio manufacturers came to Northern Ireland recently they found that the nimbleness of finger of Ulster men and women was invaluable for this delicate work.
This skill had been developed through centuries of experience in the linen trade and is a type of work particularly


suitable for women. But once the craftsmen and women go, it becomes very hard to replace them. The pity of this trend is that more and more women are leaving this ancient craft industry for unskilled work, and this means, of course, that in time we shall lose a great national asset.
During the First World War, and again in the last war, the Government took over the trade because of the shortage of flax and cotton. Imports of flax virtually ceased and all flax, straw, fibre and tow were offered to the Ministry of Supply. This could then only be obtained, spun and woven by getting a licence from the Flax Control Board acting on behalf of the Ministry. For the most part, releases of flax and licences to spin and weave were only granted to fulfil Government contracts and for essential exports to hard currency countries. Over 200 million yards of cloth and 90 per cent. of the Service shirts for the British forces were made in Ulster factories, but production for the ordinary British consumer was very small indeed.
In normal times, most of the flax is imported from the Low Countries and the Baltic, but during the war home cultivation was helped by subsidies. Prices were pushed up to an extraordinary extent so as to encourage farmers, scutchers and other producers, and the home crop was increased by 10 times. In 1943 alone Northern Ireland produced about 17,000 tons of fibre. When the war was over the trade was handed back to private firms. Prices were then very inflated and before long values collapsed and caused the bankruptcy of many small firms.
Before the First World War there were about 40,000 looms in Northern Ireland. At the beginning of the Second World War there were 26,000 and these are still in existence today, but 30 per cent, of them are idle. Bearing in mind the great problem of unemployment in the province, this is indeed a serious state of affairs.
A highly reputable and long established family firm of linen manufacturers who have provided employment in Newtownards, in my constituency, for many years, has told me about some of the anomalies of the present Purchase Tax and how inconsistent and unfair it is. For instance, this linen terry towel in my hand, which is 18 ins. by 32 ins., pays
1s. 11¼d. per towel in Purchase Tax whereas this one, which is 5 ins. larger, pays 7d. less tax. The reason for this is that the larger towel is over half a square yard in size and is, therefore, included in the larger area of cloth, which makes the tax smaller.
This particular firm in Newtownards started off by making these terry towels 18 by 36 ins. in size but soon discovered that the Purchase Tax would be 2s. 4d. per towel. So they then decided that the only thing to do was to make one towel for the home market and one for the export trade. For the export trade they made a towel 18 by 32 ins. but for the home market they manufacture the larger towel with the smaller tax. This, of course, means duplication and double stocks. It is quite an uneconomic production, due entirely to the peculiar vagaries of the Purchase Tax.
In 1810, Napoleon Bonaparte offered an award of 1 million francs to an inventor who could devise the best machinery for the spinning of flax yarn. I do not suggest that the Financial Secretary has the power of a Napoleon, but I do suggest that he might have the inclination to reward an industry for its long and valuable service to this country, not only for what it does for the export trade as a major dollar earner, but also for the immense contribution it made in time of war. I earnestly hope that the Government will adopt the suggestion we have made and ease, if only a little, the crushing burden on the linen trade which we Northern Ireland Members consider both unwarranted and unfair.

12.43 p.m.

Mr. Richard Fort (Clitheroe): I have great pleasure in following the hon. Lady the Member for Down, North (Mrs. Ford), because she has really answered the question put by the hon. Member for Ealing, North (Mr. J. Hudson), who asked why a Lancashire Member could support Northern Ireland Members when so many of his constituents are engaged in manufacturing textiles which compete with our own industry in Lancashire in certain ranges.
Purchase Tax makes us companions. It is because of this tax that I and others have noted with pleasure the Motion of my hon. Friends from Northern Ireland. Though the cotton and linen industries are


competitors, they have much in common in their background. The products of both are in parts of the British Isles which have a strong regional feeling and accent, though, unlike Celtic Scotland and Wales, they both speak the English language.
Both industries are similar in that so many Lancashire villages and towns depend for their livelihood on the cotton industry as do so many towns and villages of Northern Ireland on the linen industry. Yet in parts of Lancashire, as in Northern Ireland, there are great engineering firms and also other industries.
As I have said, there is much similarity between the two industries, but in one respect we are fortunate as compared with our friends in Northern Ireland. In Lancashire, at present, we are not suffering from any unemployment and nowhere is there unemployment caused as a result of Purchase Tax. I, for my part, am very glad to be able to speak for the cause which my hon. Friends have pleaded this morning, and to help, if I can, to remove an imposition which has contributed so much to one of the greatest social evils anywhere in the world, namely, unemployment.
The way that Purchase Tax affects the linen textile industry is, clearly, very similar to what it does to the rest of the non-woollen textile industries. It has the same effect on cotton and rayon as on linen in two respects. First of all, it distorts quality and, secondly, it produces anomalies, though we are luckier when compared with my hon. Friends in Northern Ireland.

Mr. W. R. Williams (Droylsden): Would the hon. Gentleman go a bit further and agree that it results in contracting industry as well?

Mr. Fort: I would not follow the hon. Gentleman to that degree as far as the cotton and rayon industries are concerned, but it does distort quality and results in goods being made of the sort which is not what the industry wants to make. But in view of the heavy demand for textiles at present, I could not conscientiously accept the view that this tax actually contracts the industry.

Mr. Williams: The hon. Gentleman must know as well as I do that in Lancashire there must be about 30,000 people from the cotton industry who have been dispersed to other industries because of some of these happenings.

Mr. Fort: I agree with the hon. Gentleman that large numbers have left the industry but I am bound to say that the cause is wider than that which we are debating today. But, undoubtedly, Purchase Tax does distort an industry and produces anomalies, as my hon. Friend the Member for Down, North showed with her linen terry towels. That, too, is a commonplace in the cotton textile industry.
I have battled with the Customs and Excise Department and with my right hon. Friend on this problem, particularly on the weaving of cleaning cloths. One sort with a small difference in dimensions and cloth construction compared with another attracted tax, whereas the other, which was identical as far as housewives and the rest of us could see, avoided it. Such anomalies are one of the curses of this tax.
Another of its features affecting home trade is that into certain furnishing cloths which might be just over the D level enough wool can be introduced into the yarn so that the cloth can qualify as a woollen textile, for which the D level is higher and, therefore, it does not attract Purchase Tax. Yet the addition of this wool in the yarn is no more advantageous from the consumer's point of view than if it had been entirely spun from cotton. This is exactly the same sort of anomaly as my hon. Friends have reported as existing in the linen trade.
As in Northern Ireland, we in Lancashire find that these anomalies have caused cloths to be made of lower quality than are really required abroad, and so the manufacture of certain classes of cloth becomes a great deal more restricted and difficult. It is exactly the sort of cloths on which the export trade ought to be relying—the higher grades and speciality cloths—which are adversely affected.
I wish to draw attention to the effect which this has on our markets overseas. Australia is the one I have in mind, where the demand is increasing for the higher grade cloths. One of the largest


single categories is for 8 million square yards annually of a woven spun rayon cloth for which the price is just over 40d. per square yard above the manufacturer's D level, which is 3s. 4d., or 40d. That cloth is increasingly being demanded in Australia.
In Sweden, the difference is rather more marked. There the price is about 43d. per square yard. When a cloth attracts Purchase Tax here, manufacturers shy away from making it and we tend to lose the market. For example, in Sweden at present we sell just over 10 per cent, of the imports of this particular cloth as compared with Germany and Italy, who sell about 40 per cent, and 20 per cent, respectively.
I could burden the House with many more statistics. One point which impressed me about the speech of my hon. and gallant Friend the Member for Down, South was that the linen industry is able to provide such detailed statistics to fortify his argument about Purchase Tax. I should be glad to extract from some of my friends in Lancashire equally detailed statistics.
On one point I part company with my hon. Friends from Northern Ireland although in many details they have my fullest support and they would have my vote if it were necessary to divide on this Motion. They have some preference for the old Utility scheme rather than the present D scheme. Bad as the D scheme is in Lancashire, and on house furnishings and high grade cloths it represents a severe imposition, it is not as bad as the Utility scheme.
I do not know what was the experience of my hon. Friends, but the amount of time and ingenuity spent in getting round the D scheme is nothing at all compared with the time and ingenuity that used to be spent in trying to get round the Utility scheme. That system was entirely un-suited to peace-time commerce with its demand for an enormously greater range of cloths than was envisaged when the Utility scheme was introduced during the war.
When the Financial Secretary to the Treasury replies to the debate, I hope that he will not over-emphasise the argument on which the Chancellor is fond of relying. The Chancellor said recently that the industry should not worry too much about the Purchase Tax on non-

woollen textiles because it represents such a small part of the total turnover of trade, and in any case, certainly in Lancashire, the trade had benefited because of the fall in raw material prices.
That argument does not represent reality. The tax falls exceedingly hardly on certain parts of the industry, certain factories and manufacturers. It may be that, taking the industry as a whole, it is small, but for the parts affected the: incidence of Purchase Tax is a most important factor. I hope that in the reply today we shall not have another round of the same argument.
I should like to hear my right hon. Friend say that the Treasury are seriously considering some other system of raising an equivalent sum of money. We know about their difficulties in finding the money they need. I hope that my right hon. Friend will say that they are trying to find some other means, perhaps by a flat rate of tax, which would not impose upon the non-woollen textile industry and the linen industry this imposition of Purchase Tax at D level.

12.56 p.m.

Mr. W. R. Williams (Droylsden): I agree with a great deal of what was. said by the hon. Member for Clitheroe (Mr. Fort) about the effect of Purchase Tax on the cotton and rayon goods manufactured in Lancashire. However, I am not sure that if we were debating the question of the Utility scheme versus the new form of tax I should entirely agree with him, but I do not want to waste time on that argument.
I have a good deal of sympathy with the point of view expressed by the hon Members from Northern Ireland. I sympathise profoundly with them in that they have such a high rate of unemployment. I come from Wales. I spent the bigger part of the inter-war years in Lancashire. Between my experience in Lancashire and my earlier experience in Wales, I know something about the soul-destroying effect of unemployment.
If there are 42,000 people unemployed in Northern Ireland, that is a special problem which demands the attention of the Chancellor and the Government. That is a tremendously high proportion of the population. When 6,000 more people go on to the unemployment roll, that is most serious for Northern


Ireland. If I had time I should like to recall the days when I visited some of the fine factories in Northern Ireland when I was connected with the Union of Post Office Workers. I am sorry to think that many of them have been closed and that others have had the scope of their activities contracted.
There is a danger lest we should be satisfied as an industrial manufacturing nation with the manufacture of the cheapest type of goods. Our country has been noted for quality goods. The hon. Member for Down, North (Mrs. Ford) referred to trousseaux and the linen which was placed in the bottom drawer. I should be most surprised if I did not find at my mother's home in North Wales evidence of what the hon. Lady referred to. High-grade material used to be made in those days. I recall the Welsh quilts. The young woman who was about to be married would save them for her bottom drawer, in addition to the linen to which the hon. Lady referred. Those quilts were made by craftsmen.
We shall be making a great mistake as a manufacturing nation if in the future we come to be satisfied with mass-produced and, perhaps, inferior goods. There are two reasons for this. First, I do not believe there will be a demand in world markets for inferior goods from this country. There are plenty of other nations, like Japan and—I must not mention too many Commonwealth countries —possibly some nations within the Commonwealth, who will be able to supply cheaper types of manufactured goods to areas which cannot afford our quality goods. From the point of view of our export trade, we must be very careful about the production of inferior goods.
The hon. Member for Clitheroe (Mr. Fort) referred to the Scandinavian market. I was in Norway not many years ago, and I remember the pride which I felt at the way the people of Norway referred to the quality clothing materials, silverware and other goods which came from this country. I took great pride in the fact that they had been manufactured in Yorkshire, Lancashire, Sheffield, Birmingham and so on. It would be a bad day for us, if we came to be known as a nation which dealt only in inferior materials and goods as a result of this tax.
The other reason is the effect upon our own workers of dealing with inferior goods. We have seen a deterioration over many years, and it is a great pity. 1 remember some of the men who used to be engaged in the clockmaking, pottery and clothing industries and the great pride that they took in the fact that they were creating worthy, beautiful things. They used to put their character, their thoughts and their impressions into the goods which they created. I hope we shall not allow ourselves to turn to mass-production methods in everything that we do.
I hope that the Financial Secretary to the Treasury, who, I am sure, will be most sympathetic towards my arguments, will be able to give some encouragement to the people in Lancashire, Northern Ireland and other places who would like to raise the quality of the goods which they manufacture, and that we shall once again be able to look the world in the face and say that our goods are superior to any others in the world because of their quality and the skill and ability devoted to their production.
I am sure that there will be no question of dividing upon the Motion, but if hon. Members from Northern Ireland felt that they must challenge the Government, they could rely on me, in view of my experience in Lancashire and Wales, to support them.

1.3 p.m.

Mr. A. G. Bottomley (Rochester and Chatham): I am sure that the House will join me in congratulating the hon. and gallant Member for Down, South (Captain Orr) on the able and charming way in which he moved the Motion, which has been so well supported by his hon. Friends.
I also congratulate my hon. Friend the Member for Ealing, North (Mr. J. Hudson), but I ought to disclose that my wife, who is a great admirer of many of the things that he does—she belongs to the temperance movement—will be very disappointed that my hon. Friend did not say that if more land were devoted to the growing of flax, less would be available for the growing of barley.
The hon. and gallant Member for Down, South said that the people of Northern Ireland were pacific, kindly and gentle. We all agree. It can equally


be said that they are seldom heard in this House. However, I am confident that if Labour Party candidates were returned by Northern Ireland, this House would hear much more about Northern Ireland's difficulties. I hope that the debate will arouse greater interest on these lines and show the need for a different political representation of Northern Ireland in this House if the affairs of Northern Ireland are to be adequately aired.
A very serious situation has been described to us. The hon. and gallant Gentleman said that 9 per cent of the insured population of Northern Ireland are unemployed. That is very bad indeed. I believe it is the highest figure that there has been for a long time. I took a personal interest in Northern Ireland under the distribution of industry policy of the Labour Government. I also have a close association with the City of Belfast through my constituency. Flying boats were initially produced by Short Brothers at Rochester. Eventually it became apparent that the flying boats were getting too heavy for that area, for they could not rise from the Medway, as a bridge caused difficulties and there was danger of loss of life, not only in respect of pilots but also in respect of residents. It was put to me that Northern Ireland would be helped if the flying boat industry was transferred to Belfast, where there was a much better waterway. The industry was accordingly transferred to Belfast.
I believe that flying boats still have a future, but, unfortunately, for the moment the technicians and scientists have decided that there is not the opportunity for the flying boat that some of us think there ought to be. This is a matter which ought to be looked at very closely, because the flying boat industry could do much to ease the unemployment situation in Northern Ireland. I will not develop that subject any further. The hon. and gallant Gentleman referred not only to the linen industry but also to the two other basic industries, agriculture and shipbuilding. However, it is the linen industry about which I must speak.
We have this morning seen some excellent samples of the work of the linen industry. Judging by the way markets

are closing because of the limitation imposed on the industry as a result of direct Government action, giving away these products may be the only way in which it will be possible to dispose of them in the future. Care must be taken in offering them as gifts. There must be no suggestion of bribery of the Financial Secretary to the Treasury, although I am sure that he would never succumb to that temptation. However, our overseas competitors may say that it is a method of subsidising exports, and we must not be accused of that.
It is the D tax which has caused the trouble. I am naturally, as a former Secretary for Overseas Trade, interested in the export trade, as all other hon. Members must be. It is a commonplace to say that it is our lifeblood and is vital to the interests of our nation. There is a unanimity of view among manufacturers, workers, retailers and the general public, that the D tax is generally bad for the industry. We have to recognise that, because of the industrial development which has been going on in the world, most countries are now producing their own textiles, as well as many other goods.
I still believe that we can produce the highest quality goods, and I believe that it is in that field that we shall find our most hopeful future in the export trade. Consequently, we should concentrate upon quality goods and should give every encouragement and opportunity to our designers, technicians, scientists and other workers. I believe that the D tax is a discouragement because it does not provide the same opportunity to produce high-quality goods as it does in the case of low-quality goods, and it is only by means of the high quality goods that we can still hold our own in the export market.
Chancellors of the Exchequer in the Labour Government looked upon Purchase Tax as a means of influencing the direction of production or of guiding exports into the proper markets. This is really the only justification for the continuance of Purchase Tax. When my right hon. Friend the Member for Leeds, South (Mr. Gaitskell) was Chancellor of the Exchequer in 1951, he took the very unpopular step of imposing a tax on refrigerators, washing machines, radios


and television sets, but he did that because of our defence programme. We had to ensure that a large part of our effort was directed to defence, and that meant that we had to cut down the production of other goods. Purchase Tax was a means of doing that. We also had to have regard to the export market, and the imposition of Purchase Tax on some articles provided a means of directing certain goods into the export market. Therefore, under Labour Chancellors of the Exchequer, Purchase Tax was used in relation to production and the export market in order to benefit the country's economy.
We feel the same today as we did earlier, particularly in regard to the linen industry of Northern Ireland. If the right hon. Member for Blackburn, West (Mr. Assheton) were still here—he left a few moments ago—I could call to his attention what he said in the last Budget debate:
Nonetheless I am one of those who believe that Purchase Tax is definitely harmful, particularly to the textile industry."—[OFFICIAL REPORT, 10th June, 1953; Vol. 516, c. 249.]
If hon. Members from Northern Ireland and Lancashire who sit on the other side of the House would join with us, this iniquitous tax could be ended in the next Budget.

1.11 p.m.

The Financial Secretary to the Treasury (Mr. John Boyd-Carpenter): We have had a very interesting and very helpful debate. I certainly do not rise to suggest to the House that there is any reason why it should not, if it so wishes, adopt the Motion which my hon. and gallant Friend the Member for Down, South (Captain Orr) moved in such eloquent, elegant and charming terms. I should like to make one or two comments on this important subject.
As hon. Members will understand, I might preface my remarks by saying that I speak under two considerable handicaps. In the first place, it is peculiarly unwise for anyone who speaks from this Box to indulge in the merest speculation about the future of taxation matters. It is unwise from every point of view and not least from the point of view of the industries concerned. I do not propose that anything I say this afternoon shall be in such terms as to give any indication

of what may or may not happen in matters affecting taxation.
The House is aware of—indeed, the Motion in terms welcomes—the statement of the Chancellor a few days ago as to his immediate intentions with respect to Purchase Tax. Therefore, I am fortified in the belief that any observations I may now make will not be misunderstood as being designed to convey, or as, in fact, as conveying, any information about matters of taxation. I might perhaps nonetheless be allowed to make one general comment on taxation questions.
It is one of the easiest of Parliamentary exercises, and one which, I must admit, I have myself from time to time indulged, to make an extremely powerful case against a particular item of taxation on a particular article. It is not very difficult to do that quite well. What is much more difficult is to mobilise a corresponding degree of unanimity as to the consequential issues and the extent to which as a consequence of the removal of a tax from one article, a tax should be reduced or imposed on another. On these issues one tends to find rather less agreement than on the original issue.
I listened, as I am sure the House did, to my hon. and gallant Friend with very great interest. I was a little surprised to see attributed to him, or to any Irishman, the quality of docility. I have a considerable amount of Northern Irish blood in me and, although I always show docility in all circumstances, that is due to the admixture of Scottish and Anglo-Saxon blood, diluting the Irish and reducing what, if the hon. Member for Ealing, North (Mr. J. Hudson) were not here, I would call its original high proof quality.
The representatives of Northern Ireland, as has been made clear in this debate, are very properly extremely firm in their support of the interests of those whom they represent and of the great and historic province they represent in this House. I was a little surprised to hear the hon. Member for Droylsden (Mr. W. R. Williams) suggesting that the interests of Northern Ireland would be more effectively served by different political representation.

Mr. W. R. Williams: The hon. Member for Droylsden never said anything of the kind.

Mr. Boyd-Carpenter: I am delighted to hear it. It was another hon. Member and I apologise for attributing to the hon. Member for Droylsden so silly an observation, because it is a peculiarly silly observation, as is borne out by the fact that there are a number of Unionist representatives from Northern Ireland here today and none of the representatives of another political colour who represent Northern Ireland in this House has seen fit to be present or to take part in the debate.
I was interested to hear the right hon. Member for Rochester and Chatham (Mr. Bottomley) avow his, and as I understood, his party's belief in the encouragement of high quality goods. I certainly would not quarrel with what he said on the subject, but he will have to make his peace with his right hon. Friend the Member for Leeds, South (Mr. Gaitskell) after having said that. The right hon. Member may recall that when, during the passage of last year's Finance Bill, reductions were made in the higher rates of Purchase Tax on high quality goods, the right hon. Member for Leeds, South was extremely furious and indicated that we had gone wholly the wrong way about it. I was delighted today to hear what seemed to me more sensible observations.

Mr. Bottomley: The right hon. Gentleman must not misquote. The discussion last year was on luxury, and particularly quality, goods which do not help the export trade.

Mr. Boyd-Carpenter: On the contrary, the discussion last year was on high quality goods which do help the export trade. When the right hon. Member, by that observation, seems to indicate that what he calls a luxury article cannot be a high quality article, he seems to be confusing counsel. It is not a term I would use in controversy because, largely, it is a prejudicial term. We were criticised by his right hon. Friend for making reductions in the higher rates instead of in the lower rates. The right hon. Member can turn up the Finance Bill debates and he will find that a great deal of time was spent by his hon. Friends in making precisely that criticism. I hope that he is not cross with me as I was saying that he was so much more sensible than his right hon. Friend.

Mr. Bottomley: I am always prepared to acknowledge and take second place to so eminent an economist as my right hon. Friend the Member for Leeds, South (Mr. Gaitskell). If the right hon. Gentleman took advice from my right hon. Friend instead of trying to make play as he is doing at the moment, he would be much better informed.

Mr. W. R. Williams: The Financial Secretary will recall that during those long debates the endeavour we made on this side of the House was to raise the D level.

Mr. Boyd-Carpenter: The hon. Member for Droylsden did concern himself with that matter, but that is not exactly the point. The point is that last year we did concentrate a considerable degree of relief on the high quality goods which help exports and we were criticised for so doing by his right hon. Friends on the bench opposite. The most agreeable suggestion of the right hon. Member for Rochester and Chatham to put himself second to his right hon. Friend is, once again, an example of his endearing modesty.
The issue which this Motion raises is interesting and important. I can say at once that Her Majesty's Government are very much concerned with the interests and prosperity of Northern Ireland. I would not seek for a moment to contradict what my hon. Friends from that province have said about the difficulty of the problems confronting the people and Government of Northern Ireland, nor of the importance, from the point of view of the United Kingdom as a whole, of finding sensible solutions to those problems. It is beyond dispute that the level of unemployment in Northern Ireland is considerably higher than that to be found on this side of St. George's Channel and it is undoubtedly the case that Northern Ireland's industry has some peculiar and difficult problems with which to deal.
Hon. Members are aware of a number of Measures which Her Majesty's Government in London have sought to concert with the Government of Stormont for giving assistance and relief in the solution of these problems, and in the solution of which we are at least as concerned as are the Northern Ireland Government, because we regard the prosperity of our


friends in Northern Ireland who, as the hon. and gallant Gentleman very properly said, have been through so much with us in recent years, as a matter of very direct and very intimate concern to us.
I can certainly assure my hon. and gallant Friend that in any action that we take we shall certainly bear very fully in mind the interests of Northern Ireland. This Motion, however, relates to a particular issue of taxation affecting one particular industry, and I think it would be appropriate if I now direct my remarks more narrowly to the particular issues which have been raised in that context.
Nothing that I now say underrates the importance of the problem. On the other hand, I thought that my hon. and gallant Friend the Member for Down, South, carried away, no doubt, by a burning eloquence, placed a little over-emphasis on the gloomy aspect of the linen industry's problems and did not give so much weight as I would be inclined to do to the more encouraging signs which are to be found in its development in recent months.
It is true, of course, that the Irish linen textile industry, in common with the textile industry of the United Kingdom, and, indeed with most textile industries throughout the world, suffered a severe recession during 1952. That was a worldwide phenomenon and one suffered sometimes in greater degree by textile industries in other countries which do not enjoy the benefit of a D scheme, or, indeed, of a Purchase Tax.
I think it is only fair to the industry, and to the remarkable efforts it has made, to pay tribute to the considerable degree of expansion in production and employment which has since taken place in it. In that context, I wish to say how naturally gratifying It is to the Government and, I am perfectly certain, to the House, to notice the substantial contribution which the increase in exports of linen goods has made to the solution of the general export problem.
The recovery which has been made from the depression in 1952 is very noticeable when one considers the figures. I do not want to inflict upon the House any undue dosage of figures, but, as my hon. and gallant Friend was good enough to quote one or two, it might be for the

assistance of the House if I indulged similarly in what I undertake will be a quite brief statistical analysis.
For example, it is very noticeable how in 1953 the exports of linen and Union goods, in square yards, rose from a first quarter figure of 12.2 million—itself very substantially above the low level of 7.5 million in the second quarter of 1952— to 14.3 million, and how overall production rose in 1953, though not in the same degree, from 21 million to 228 million square yards.
I am not saying that we would not like to have seen a substantially greater increase, but I think it is fair to say, in view of the gloomier aspects which have been perfectly naturally stressed, that this industry has made very considerable steps towards its own recovery. The figures of employment, with which my hon. and gallant Friend was very properly concerned, are perhaps even more encouraging. In the middle of 1952, the unemployment in this industry rose to, I am sorry to say, a figure in excess of 24 per cent. The latest statistics that I have available show a figure of just under 4 per cent. That, I concede at once, is a higher figure proportionately than the United Kingdom average, but it is significant that it is considerably below the Ulster average. Therefore, looked at from the point of view of Ulster as a whole, it appears that the textile industry, though it has had difficulties in this respect, has mercifully a much lower rate of unemployment than it had some 18 months ago, and does not, in fact, present one of the more serious aspects from the employment point of view in the Ulster economy.
I hasten to emphasise that that does not mean that I regard this figure as satisfactory. None the less, it is appropriate to get the matter into proportion and, as I say, to congratulate the industry and its leaders on the very hard, successful and efficient work which must have gone into that amelioration in their position.
My hon. and gallant Friend the Member for Belfast, North (Lieut.-Colonel Hyde), after disclosing a most interesting hereditary interest in the industry, took the industry back to the Phoenicians, though I am not sure whether he was taking his hereditary interest back so far. He is a distinguished author, and, from


a family point of view, has a long hereditary connection with the industry. Indeed, I was reminded, by way of contrast, of the observations made in this House by Mr. Cobden of Mr. Bright. Mr. Cobden observed of Mr. Bright that he was a spinner of long yarns of low quality. I would say of my hon. and gallant Friend's writings that he is a spinner of relatively high quality yarns, and that his readers only complain of their shortness. At any rate, he has kept in the spinning business.
One of the important features of this industry is, of course, that it has this long background of acquired skill and craftsmanship, a background which, as my hon. and gallant Friend said—and he chose the word with his usual precision—is interwoven in the history of Ulster. The picture, therefore, as I see it, is not an easy one. It is equally not one on which it is right to indulge in excessive pessimism. When my hon. and gallant Friend the Member for Down, South, and in particular my hon. and gallant Friend the Member for Belfast, North, referred to the question of the burden of the tax on this industry compared with the burden of the tax on the cotton industry, he entered, of course, a more difficult field.
It is, of course, natural to make these comparisons, and it is also natural for these comparisons to be viewed in rather different ways depending on the standpoint from which one views them. None the less, it is not right completely to ignore the advantage which, under the present tax, the linen industry enjoys as compared with the cotton industry.
There are a considerable number of specific articles in which this industry's linen products have an advantage over comparable articles made in cotton. I need only refer to pillow cases, different kinds of bolster cases, table napkins, towels and tea towels, and, indeed, to the number of handkerchiefs to which one or two hon. Members not only referred, but demonstrated. Therefore, it is not quite fair to say that, in a certain degree, this industry has no advantage over competing cotton products.
As my hon. and gallant Friend the Member for Down, South is well aware, in the lighter linens—those below 6 ozs. —there is still an advantage which I rather understood he regarded as

adequate in the original forecast of 6s. as against 4s. My hon. Friend may say that these lighter—under 6 ozs.—linens do not constitute a very substantial part of the trade, but it depends really on what one regards as substantial.
No actual records are available as to the weights of various types of linen cloth produced in Northern Ireland, but I have been told by the Ministry of Commerce in Northern Ireland that cloth under 6 oz. a square yard represents about one-third of local production. Certain cloths, such as interlining cloth, are not subject to tax because they are under the 4s. D level, but for this other cloth there is this relative preference to which my hon. Friend attached some importance. The picture is not one of complete equality between cotton and linen. It is a varying picture with a differential in respect of some cloths and equality in others. I quote that for exactness, and I am not asking hon. Members to draw an inference from it.
There is one other minor point. My hon. and gallant Friend the Member for Down, South said that the Ulster linen industry had not been invited to give evidence before the Douglas Committee. It is true that no specific invitation was extended to them or to other industries. But there was an advertisement bearing a general invitation to give evidence, and it would have been open for the Ulster linen manufacturers to give evidence had they so desired. They did not so desire, but I do not think they were necessarily prejudiced by not doing so. But, in fairness to Sir William Douglas and his colleagues I should make it clear that the linen manufacturers were offered, as were others, a general invitation, and there was no discrimination against them.
Those are the major points which were made in the course of this discussion. I can sum up the attitude which Her Majesty's Government adopt on this specific issue by recalling the answer given on 17th February to a Parliamentary Question by my hon. and gallant Friend in which—not for the first time, as he said—he raised this issue. On behalf of my right hon. Friend I then said:
This matter will be borne in mind when my right hon. Friend next reviews the D level for textiles."—[OFFICIAL REPORT, 17th February, 1954; Vol. 523, c. 221.]
Beyond that, of course, I cannot go.
I have already pointed out that my fight hon. Friend's general statement indicates that he has no intention of making further changes, but I can assure hon. Members that what they have said in the course of this helpful and constructive debate will be looked at most carefully as it appears in HANSARD. It is generally helpful to have hon. Members' views in connection with these complicated issues and this difficult tax. When the time comes for the next review of textiles those arguments will be given their full weight.

1.34 p.m.

Sir David Campbell: I have the honour to represent South Belfast in this House. Although in my constituency there are many persons employed in all sections of the linen industry, I also regret that I have many constituents who were employed in the linen industry and who are now out of work. The hon. Member for Droylsden (Mr. W. R. Williams) extended his sympathy to us in Northern Ireland, where the unemployment problem is much greater than in any other part of the United Kingdom.
My hon. Friend the Member for Clitheroe (Mr. Fort) said that in Lancashire they rather preferred the new D level to the old Utility scheme. We prefer the Utility scheme because the D scheme differentiates against Ulster. I am most grateful to my right hon. Friend the Financial Secretary for his tribute to the Ulster linen industry for the partial recovery it has made during the last 18 months. I am sure he will agree that the aim should be to make the partial recovery complete, and I trust that he will also agree that one of the best methods of ensuring that is by his implementing the Motion now before the House.
We are also grateful to the Financial Secretary for his most sympathetic references to our difficulties both in connection with unemployment and the marketing of our farm produce in Northern Ireland. I know that we can expect from him not only sympathy, but a practical demonstration of help. We are grateful that, on behalf of the Government, he has accepted this Motion and we earnestly trust that he will lose no time in implementing it. We hope that hon.
Members, whom we thank for their support, will pass this Motion without a Division.

1.38 p.m.

Mr. Ede: I regret that I was not present during the earlier part of the debate, but do I understand that the Financial Secretary has accepted the Motion? I gathered from the speech to which we have just listened that the hon. Member for Belfast, South (Sir D. Campbell) assumed it had been accepted by the right hon. Gentleman.

Mr. Boyd-Carpenter: I do not think the right hon. Gentleman was in the House when I began my speech. He therefore did not hear me say, as I recall saying, that this Private Member's Motion was not one which I would recommend the House to find any difficulty in accepting if it so wished. That is as accurate a reproduction of the observations I made as my limited capacity for recollection permits.

Mr. Ede: Once again, as is not unusual in these matters, the right hon. Gentleman attempts to conceal his meaning behind a very considerable flow of words. If that part of the right hon. Gentleman's speech which I heard gives Ulstermen any satisfaction, then they are very different from the Ulster people I met when I was Home Secretary. All he said in my hearing was that there was no ground for excessive pessimism in the situation. That was one of his shorter and more understandable phrases. If that satisfies Ulster people, they have very considerably deteriorated from the days of the great hero of the hon. Lady the Member for Down, North (Mrs. Ford)—Sir Edward Carson. I tremble to think of the words he would have used in reply to the speech to which we have just listened.
If the right hon. Gentleman finds no difficulty in accepting this Motion, I should certainly not advise my hon. Friends—

Mr. Boyd-Carpenter: Both of them?

Mr. Ede: No, there are more than two; so the right hon. Gentleman's joke has misfired.
I should be quite willing to vote for this Motion in the hope that it would


receive rather more favourable consideration from the Chancellor of the Exchequer than it has received from the Financial Secretary.

Captain Orr: Is the right hon. Gentleman also recommending hon. Members in his party who represent Northern Ireland constituencies to support the Motion?

Mr. Ede: Why I should recommend it to non-existent people I do not know. Only the non-existent are likely to find comfort in the Financial Secretary's remarks.
Question put, and agreed to.
Resolved,
That this House, while welcoming the Chancellor of the Exchequer's recent statement about the Purchase Tax as removing uncertainty harmful to all trades affected by the tax, invites the Chancellor to take account of the contribution of the linen industry to the export drive and of the importance of this industry for the maintenance of prosperity and employment in Northern Ireland, and to include in the next revision of the tax upon textiles provisions which will remove the disability under which linen suffers.

COMPANY DIVIDENDS (LIMITATION)

1.41 p.m.

Mr. Dryden Brook: I beg to move,
That this House notes with regret the recent increases in company dividends and the effect this is having on wages; and therefore presses the Government to take the necessary steps to stop these increases by introducing legislation for the statutory limitation of dividends.
I am well aware that a debate took place in this House on Wednesday which covered a good deal of the ground to which this Motion relates, but when 1 tabled my Motion I had no idea that that debate would take place, and I hope that in the course of my remarks I shall approach the problem from a somewhat different angle from that from which it was approached in the debate on Wednesday.
This problem raises the most fundamental issue which divides the two sides of the House—namely, what is the relationship between capital and labour in industry? That is not an isolated part of the philosophies which divide the two main parties in this House. It is part of

a whole concept of government, and we on this side of the House have a fundamental opposition to the concept of government which is held on the benches opposite.
The definition of this concept which is held by the party opposite can be summed up in the Prime Minister's own words—" Set the people free." We should ask what that phrase means when it is applied to industrial relations. The Tory Press interprets that phrase by saying that industrial relations, with respect to both capital and labour, should be left to the workings of what is now called the price mechanism. What is meant by this phrase—freedom for what in industry? This conception leads us back to a period in history about 100 years ago.
The interpretation of that phrase—and it held sway up to the outbreak of the Second World War—was that Parliament must not interfere in the relationship between capital and labour in regard to profits, prices or wages. All that Parliament had to do was to maintain the ring in which people engaged in industry had the freedom to struggle for the major portion of what industry produced. Freedom in that sense meant a free-for-all as to who should get the biggest share of the cake that was produced. That conception of freedom means the freedom of the strong to exploit the weak.

Sir Herbert Williams: Who were the strong?

Mr. Brook: In the 19th Century there is no doubt who were the strong.
In the 19th Century the plea in support of the implementation of that idea was "Leave things to the workings of natural law, the law of supply and demand." The result in industry and in social life was so bad, the wages of working people were so low, that the law of supply and demand stank in the nostrils of almost every working man in this country. It became an object of ridicule and loathing on the part of the workers.
Now we have the same conception under a new guise, a new name—the price mechanism—but that new name for the old idea is no less objectionable to the working people than it was 100 years ago. No one could defend the results, of its working up to the end of the 1930s.
I remember a well-known professor of history at a northern university saying between the two wars, "The history of the 19th Century is the history of a period when the verdict of history went against the working class." The struggle of organised labour during the last century has been a struggle to right that wrong verdict. The righting of that wrong verdict cannot be done on the principles which are accepted today by the party opposite as axiomatic. It cannot be done by means of price mechanism ideas.
I have been asked who were the strong. Up to the end of the Second World War labour was always at the weak end of the stick. Therefore, the price of labour was always cheap, and any struggle by the workers was always defeated. Indeed, it was a period in which wages were always following prices. Then pressure—humanitarian pressure as well as the strength of the organised workers— gradually forced upon Parliament a different conception of the function of government. It was that new conception which reached fruition in 1945, when Labour for the first time held office with power.
From 1945 until 1951 much was done to right that wrong verdict of history which had been growing up during the previous century. Much that is done cannot be undone, although I am well aware that the proportions of the national income which went to capital and labour were radically altered in the period between 1945 and 1950. In 1928 the proportion that went to wages was 37.6 per cent. In 1938 the proportion that went to what might be called the profit-earning group was 34.8. In 1949 the share of wages had grown to 45.45 per cent., and the share that was going to profits and dividends had dwindled to 26.31 per cent.

Sir H. Williams: Who got the rest? Those percentages do not add up to 100.

Mr. Brook: I can give the hon. Member the figures for all the groups, but I was merely selecting those two because they are germane to the case which I am making, and because I do not want to detain the House.
The tendency for wages to rise is a move in the right direction, and it ought to go further. But the tendencies which are likely to be let loose under

the new dispensation will take us in the opposite direction. A few days ago my right hon. Friend the Member for Leeds, South (Mr. Gaitskell) gave figures of the increase in wages and the increase in dividends during the four quarters of the year 1952–53. In the first quarter wages rose by 5 per cent, and dividends by 5 per cent.; in the second quarter, wages rose by 4 per cent, and dividends by 6 per cent.; in the third quarter wages rose by 4 per cent, and dividends rose by 7 per cent., and in the fourth quarter wages rose by 3 per cent, and dividends by 9 per cent. My right hon. Friend also quoted the figure for January, 1954, which showed that dividends were being paid at a rate 15 per cent, above that of January, 1953.
Over the four quarters of that year the rise in wages was gradually dwindling and the rise in dividends progressively increasing. That arises from the view of the Government that those who own capital shall be free to distribute as well as to earn as much profit as they can. That brings me to a point which has been debated more than once in this House. It is admitted that the percentage going to dividends is not so great as it was some time ago, but in the period 1952–53, although profits fell, the amount of gross dividends shared out amongst the shareholders rose.
When there is a greater amount of capital on which dividends have to be paid it is as well that we should ask ourselves how that increase in real capital has been made. Has it all come from new money put into the industry by new shareholders, or is it the capitalisation of reserves of past profit achieved by industry? I suggest that it is the latter, because we cannot open a newspaper without finding some record of bonus shares being distributed. Almost every morning last week the Press contained reports of bonus shares issued to shareholders by one company after another. As I read the "Economist" coming down in the train on Monday, I noticed that Imperial Chemical Industries are capitalising £50 million of their reserves.

Mr. G. P. Stevens: Would the hon. Member be good enough to explain to the House just how a bonus share is distributed? Can he explain how the mechanism works?

Mr. Brook: Yes, I shall be glad to do so. To the workers it means that a firm which has accumulated reserves out of profits issues a bonus share of one share to each shareholder. That means that it has doubled its capital. The next year it may pay the same dividend of 10 per cent., but it is now 20 per cent, on the original capital.

Mr. Stevens: If that company makes so much profit that it can pay the same dividend of 10 per cent, on double the capital, could it not equally have paid twice the dividend on the original capital? Is there any difference?

Mr. Brook: There is a psychological difference, which I shall explain shortly.
If we assume that the accumulation of reserves has taken place since the war, as some of it must have done, we must consider what has happened to wages in the same period. One Chancellor of the Exchequer after another has appealed to the organised workers to restrict wage claims. To a certain extent there has been a wage freeze in industry. If the workers had demanded wage increases during that period the profits would obviously have been less. The fact is that the bonus shares, in part, at any rate, contain some portion which might have been taken in wages if the organised workers had been prepared to use their strength.

Mr. Stevens: The hon. Member talks about a wage freeze, but there has been no wage freeze. Ever since the war there have been wage increases, which have been greater than the increase in dividends. Is not that so?

Mr. Brook: Could not the organised workers have demanded and got more wages if they had not been prepared to exercise restraint?

Colonel O. E. Crosthwaite-Eyre: Is it not a fact that the capital profits to which the hon. Member is referring are not profits in the normal sense, but money ploughed back by way of new buildings and machinery, thus providing better employment and a better chance for everyone to earn a livelihood? Is it not also a fact that since the war wages have risen by 60 per cent.?

Mr. Brook: I agree that the profits are ploughed back, but they are profits, and not new capital which shareholders have paid in. They have been made as profits in the first place, and I am saying that if the organised workers had been prepared to use their full power they could have claimed further increases in wages. If shareholders are given the power to claim additional interest it has a psychological effect upon the workers.

Mr. Stevens: This is a very important point. Are not those profits which are ploughed back into the business a form of savings, and is it not frequently urged by hon. Members opposite that corporate saving by companies has now taken the place of individual saving?

Mr. Brook: I agree, but the fact remains that they are now being used as a lever, whereby more profits can be distributed as dividends.

Mr. Stevens: More profits can be earned.

Mr. Brook: I am differentiating between "earned" and "distributed." If a firm pays a dividend of 10 per cent, on a capital of £50,000, and then increases that capital to £100,000 by the distribution of bonus shares, and still pays 10 per cent., the person who is receiving the dividend receives exactly double the amount of money, which he can spend as he likes.
Workpeople today are not so ignorant as they once were about events in the industrial world. The Government tend to minimise the economic effects, but the real problem is a psychological one. The problem of dividends is only one aspect of the whole. There are other factors which affect workers in relation to their wage claims. The idea of leaving everything to the price mechanism affects not merely profits and dividends, but prices, which have a relationship to wages.
There have been many debates and Questions asked in this House about the cost of living, and about the Ministry of Labour index figures. It has often been said, and the Economic Secretary to the Treasury said on Wednesday, that the Ministry of Labour index was not intended as a measure of the cost of living, but merely as an index of a wide variety of prices many of which enter into


everyday life. However, although the Economic Secretary was denying the validity of the argument that that index is a measure of the cost of living he subsequently, in the same speech, several times referred to it as the measure of the cost of living.

The Economic Secretary to the Treasury (Mr R. Maudling): I certainly did not intend to say anything of the kind. The Interim Index of Retail Prices, I was arguing, is a fair index of the movement of prices of things normally consumed by working-class households, based on statistics in 1950 which were carefully collected. It is, therefore, a very good measure of the cost of living, in my opinion.

Mr. Brook: The problem is a very much more complex one than that. It is an index of prices of a large conglomeration of goods that may enter an average working class household but many of which do not. There is a wide variety of goods which do not enter working class households every day. Moreover, even amongst working class families circumstances vary. Despite all the debates that have taken place in this House and all the Questions asked and answered on the subject, it seems to me that the two sides have never really come to grips with it.
In the debate on Wednesday, my hon. Friend the Member for Coatbridge and Airdrie (Mrs. Mann) mentioned the prices of certain foodstuffs given in the index in groups. In the index those groups of commodities are shown to have come down in price, but in fact individual items in them have risen in price. It may be that a family buys more of an article that has gone up in price than of another whose price has come down. Prices affect individual families in an entirely different way from what is supposed to be the effect upon families generally.
My hon. Friend the Member for West Ham, North (Mr. Lewis) gave a list of about a dozen different commodities the prices of which have risen steeply. Those happen to be staple commodities that enter every week into the working class budget. It is no satisfaction to a working class household to know, for instance, that the price of boiled ham has

come down while the price of bacon has gone up since 1951, because the average working class household at the present time is not able to buy boiled ham anyway. It is the prices of that small range of foodstuffs that enter every week into working class homes the prices of which have risen markedly.

Mr. Hannar Nicholls: I thank the hon. Gentleman for giving way. He has been kind about giving way. He will admit, surely, that it is fair to put alongside the commodities the price of which have gone up the commodities the prices of which have come down? Admittedly beef, butter, margarine, sugar and tea have risen slightly in price, but bacon, eggs, mutton, rabbits, vegetables have come down, and they are all equally used in ordinary households.

Mr. A. C. Manuel: Can my hon. Friend say how many of the commodities that have come down in price are consumed by old-age pensioners?

Mr. Brook: I am trying to illustrate the cleavage there is between the two sides of the House on this matter, to show the width of the gap between us. It is all very well as an economic exercise to say that what is gained on the swings is lost on the roundabouts, but what the working-class housewife is interested in is what she has to buy in the shops out of the money her husband earns, things she has to buy every week, and she knows that they have gone up steeply in price. The things that have come down in price are, on the whole, the things she does not need to buy. [HON. MEMBERS: "Oh."] It is the psychological effect on the housewife that I am trying to bring clearly before the House.
We were told the other day that between October, 1951. and January, 1954, the price of butter, for instance, had gone up from 2s. 6d. to 3s. 4d.; of margarine from Is. 2d. to Is. 6d.; of cooking fats from Is. 4d. to Is. 8d.; of National bread from Is. to Is. 3d. per 3½lb. loaf. Those are the kinds of commodities that affect households, and that enter into households every week. That is the problem as it affects the the households of working men.
I know that there has been a drop in the prices of other commodities, of textiles, for example. I am not a trade


unionist but a businessman. In my business the price of wool for making blankets has dropped from 200d. two years or so ago to less than 70d. now. The price of blankets in the shops has probably dropped 25 per cent, in the same period, but housewives buy blankets only once in 10 or 20 years. They are not things which she buys every week of her life.
The central fact in the industrial field since the end of the war is the shift in the balance of power. Full employment means that for the first time in the history of this country the strong end of the stick is held by the working class. It is the biggest factor in this problem of freedom for the working people that they have ever known. The strong end of the stick is held by real people working in industry, not by the inanimate factors of capital and profits. The Prime Minister talks about setting the people free. Full employment has made the greatest contribution in history to real freedom for the mass of the people of this country.
I well remember some correspondence that was going on in a local newspaper during the 1950 General Election. One contribution from the Labour point of view was written by a man who was an overlooker in a factory. He was replying to two other writers, employers for whom he himself had previously worked. The outstanding point about his letter was the last sentence, in which he said that if that correspondence had taken place before the war he would not have dared to have signed his name to his letter.

Sir H. Williams: Rot.

Mr. Brook: It is true. It is no use the hon. Gentleman protesting. Anyone who has been associated with the working people knows that is true.

Sir H. Williams: When I was an employee I wrote many dozens of letters without ever looking over my shoulder. Why should I have done?

Mr. Brook: I will leave the House to judge the value of that interjection.

Sir H. Williams: I thank the hon. Member.

Mr. Brook: I wonder, when hon. Members opposite talk about leaving everything in industry, and good rela

tions in industry, to the workings of the price mechanism, where they stop. The price mechanism means leaving people free to struggle for what they can get. We have here a situation which has never occurred in the country before—the organised workers, as the sellers of labour, hold the determining power in industry and, if the workers care to use that power, the price of labour can be what they themselves determine.
Let us consider the two aspects of the problem. In relation to distributed profits, the Government say that the only people who shall decide the rate of distribution are those engaged in the distribution. Do they apply the same yardstick when they determine the price of labour for the workman? The Economic Secretary nods his head, but I would remind him of the facts. Even today, all wages are the subject of negotiations between the opposite sides who are parties to the claim, and in the last resort, although arbitration may be voluntary, the Minister of Labour can step in. As far as I know, the Chancellor of the Exchequer has refused to do the same thing with employers in the distribution of profits. Is that a fact or is it not?

Mr. Maudling: The Government's position is quite clear. We do not think that the Government should intervene in negotiations on wages between employers and workpeople, nor do we believe in any form of compulsory intervention on the level of the distribution of dividends, but the Chancellor has made it plain more than once that he considers it of great importance that there should be continuing voluntary restraint in personal incomes from all sources.

Mr. Brook: If the Chancellor is of that opinion and he sees, as he must see every day, that in almost every company report issued, even where profits may have fallen, there is an announcement of higher dividends, is it not time he did something more than make pious appeals to these people? Is it accurate to say that the Government do nothing more than make pious appeals about wage claims? Surely the hon. Member knows that, on the application of either party to a dispute, the Minister of Labour can intervene and order an inquiry. Is not that something more than what the


Chancellor has been willing to do about the distribution of dividends?
If capital is to be free to make what profits it can without reference to any ethical principle, surely labour must be allowed to adopt the same ethical standards. Whether the price mechanism is an efficient economic weapon or not is arguable, but it must surely be obvious that, however effective the price mechanism may be in the economic field, the price mechanism and the law of supply and demand comprise a completely non-moral force. If we are seeking justice towards the two sides in industry we should try to remove this force, which is completely non-moral, for, if not, surely we are expecting something ethical to come out of something which has no ethical application at all.
The logical outcome, it seems to me, is one of two alternatives. Either we must sacrifice full employment or we must find some other basis by which the relationship between capital and labour in industry can be governed. If full employment were to give the workers the power to demand whatever wages they willed, of their own volition, that would be a position, it seems to me, which we on this side of the House would not welcome. But the Government are in an entirely different position because over and over again they have staked their belief in the workings of the price mechanism. It is, therefore, up to them to face the alternative—that, under full employment, what I have described is likely to happen.
That compels us to face another problem. In spite of their protestations, do hon. Members opposite really believe in full employment? During the 1950 Election the Prime Minister was very careful in the phrases which he used. I do not
think he ever used the phrase "full employment" but spoke of "a high level of employment." I can well remember what the Tory and Liberal newspapers said. The "Manchester Guardian," on the first day of 1950, said in a leading article that we could not face the year with an unemployment figure as low as it was then but that we must have more unemployment, a moderate dose of unemployment, in order to give greater flexibility in industry. The "Economist" over and over again made the same remarks in almost identical terms.
This leads me to believe that full employment, as we on this side of the House understand it, is not so sincerely or firmly held as a belief by the party opposite, and I ask myself this question, just as I ask hon. Members to put it to themselves: what would happen if, as we heard an hour ago from the hon. and gallant Member for Down, South (Captain Orr), the unemployment figure were 9 per cent.? He said the unemployment figure in Northern Ireland was 9 per cent. Supposing that was the figure in this country. What would happen in relation to the problems of dividends and wages?
In 1919, I attended a summer school at Oxford and I there met a farmer from the backblocks of New Zealand who had cut out his own sheep farm. This man kept himself abreast of modern reading. He sent me a pamphlet which he had written and, as closely as I can remember, the pamphlet—
Notice taken that 40 Members were not present;
House counted, and 40 Members not being present, the House was adjourned at Twenty Minutes past Two o'clock till Monday next.